Hyundai, Kia inflated fuel economy claims on 900,000 cars, EPA says

Audits • Automakers will reimburse owners the extra money they are paying for fuel.

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Detroit • Hyundai and Kia overstated the gas mileage on 900,000 vehicles sold in the past three years, a discovery that could bring sanctions from the U.S. government and millions of dollars in reimbursements to car owners.

The inflated mileage was uncovered in an audit of test results by the Environmental Protection Agency, which ordered the Korean automakers to replace fuel economy stickers on the affected cars. The new window stickers will have figures that are one-to-six miles per gallon lower, depending on the model, the agency said Friday.

The EPA's inquiry into the overstated figures is continuing, and the agency would not comment when asked if the companies will be fined or if a criminal investigation is under way.

But the agency said it's the first case in which erroneous test results were uncovered in such a large number of vehicles from the same manufacturer. Only two similar cases have been discovered since 2000, and those involved single models.

Hyundai and Kia executives said the higher figures were unintentional errors. They apologized and promised to pay owners of the 900,000 cars and SUVs for the difference in mileage. The payments, which will be made annually for as long as people own their cars, are likely to cost the companies hundreds of millions of dollars.

The EPA's findings come at a bad time for Hyundai and Kia, which have seen explosive sales growth in the U.S. partly because of advertising campaigns that touted gas mileage. Hyundai even poked fun at competitors who promoted special high-mileage versions of their cars, claiming that its cars had high mileage across the model lineup.

The EPA said it began looking at Hyundai and Kia when it received a dozen complaints from consumers that the mileage of their 2012 Hyundai Elantra cars fell short of numbers on the window stickers. Staffers at the EPA's vehicle and fuel emission laboratory in Ann Arbor, Mich., included the Elantra in an annual fuel economy audit.

The audit turned up discrepancies between agency test results and data turned in by Hyundai and Kia, the EPA said. As a result, the two automakers will have to knock one or two miles per gallon off the mileage posted on the window stickers of most of their models. Some models will lose three or four miles per gallon, and the Kia Soul, a funky-looking boxy small SUV, will lose six mpg from the highway mileage on its stickers.

The companies said the mistakes stemmed from procedural differences between their mileage tests and those performed by the EPA

Automakers follow EPA procedures when conducting their own mileage tests, and the EPA enforces accuracy by auditing about 15 percent of vehicles annually. .

"We're just extremely sorry about these errors," said John Krafcik, Hyundai's CEO of American operations. "We're driven to make this right."

The errors involve 13 models from the 2011 through 2013 model years, including seven Hyundais and six Kias. Window stickers will have to be changed on some versions of the following models: Hyundai's Elantra, Sonata Hybrid, Accent, Azera, Genesis, Tucson, Veloster and Santa Fe. Kia models affected include the Sorrento, Rio, Soul, Sportage and Optima Hybrid.

Michael Sprague, executive vice president of marketing for Kia Motors America, said the companies have a program in place to reimburse customers for the difference between the mileage on the window stickers and the numbers from the EPA tests.

The companies will find out how many miles the cars have been driven, find the mileage difference and calculate how much more fuel the customer used based on average regional fuel prices and combined city-highway mileage. Customers also would get a 15 percent premium for the inconvenience, and the payments would be made with debit cards, Sprague said. The owner of a car in Florida with a one mpg difference who drove 15,000 miles would get would get a debit card for $88.03 that can be refreshed every year as long as the person owns the car, Sprague said.

If all 900,000 owners get cards for $88.03, it would cost the automakers more than $79 million a year.

Sung Hwan Cho, president of Hyundai's U.S. technical center in Michigan, said the EPA requires a complex series of tests that are very sensitive and can have variations that are open to interpretation. The companies did the tests as they were making a large number of changes in their cars designed to improve mileage. The changes, such as direct fuel injection into the cylinders around the pistons, further complicated the tests, Cho said.

"This is just a procedural error," he said. "It is not intended whatsoever."

Krafcik said the companies have fixed testing procedures and are replacing window stickers on cars in dealer inventories. Owners can be confident in their mileage stickers now, he said, adding that Hyundai will still be among the industry leaders in gas mileage even with the revised window stickers.

The mileage was overstated on about one-third of the Hyundais and Kias sold during the three model years, he said.

Through October, Hyundai sold 590,000 vehicles in the U.S., up 30 percent in two years. Kia sold more than 477,000, an increase of almost 60 percent. Strong warranties and improved styling, technology and quality have vaulted them into serious competition with larger auto companies.

Hyundai and Kia are owned by the same company and share factories and research, but they sell different vehicles and market them separately.

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